Last week, we discussed asset allocation, and how to invest various pots of money associated with different goals. (See here: Financial Travel Tip #27: Where to Invest Your Travel (and Other) Savings).
But for travel purposes, you’ll be most concentrated on your travel savings account; both while accumulating money for your eventual travels, and redeeming it while you’re enjoying your travel adventure.
Generally speaking, your travel savings (in both accumulation and redemption modes) should be invested very conservatively, since you’ll have a relatively short time frame to needing the money, and can’t afford to lose value in a market fluctuation. Online high-interest savings accounts are ideal for this purpose.
Accumulation: Make it Automatic
While you’re in accumulation mode, set up an automatic transfer of money from your bank account to your travel savings account. Set it up to coincide with your paycheques, so you can effectively “pay yourself first”. And if you’re really dedicated to saving for travel, you can take any surplus funds after your bills are paid and manually transfer that over to your travel savings account too.
Redemption: Give it a Few Days
One of the things I like about keeping my travel savings tucked away in an online account is that I can’t access it instantly. So if I end up in a sticky situation and my ATM card is compromised, my financial liability is limited to the minimum balance I keep in my bank account.
But the flip side is when I need money from my travel savings account, it takes a few days for it to transfer through to my bank account. Although I’ve never had any trouble with this, it does take a little forethought and preparation to ensure the funds are then when you need them.
And if you anticipate needing a regular stream of income from your travel savings account, you can set up an automatic redemption plan, just as you did while accumulating.
Most banks have money market accounts, or some kind of high-interest savings account you can use. I like using Tangerine (formerly ING Direct) for my high-interest travel savings, and have had no complaints.
Special Deal for Professional Hobo Readers
Tangerine (formerly ING) wants to give you a bonus for opening your own savings account! When you open an account with a minimum $100 balance, they’ll give you up to a $75 bonus. It’s like an instantaneous 75% return on your money!
To take advantage of this offer, simply open an account and enter the following “Orange Key” when prompted:
Note: This may or may not work for readers of different countries (I’m not sure, but it’s possibly only a Canadian/North American discount code). But for the bonus money, it’s worth a shot!